When it comes to the Chinese army, Hong Kong’s Paul Kan learned to say yes a long time ago. In the late 1980s he tried to start a radio paging business in China for his Champion Technology. The bureaucrats at the Ministry of Posts & Telecommunications dithered, but companies owned by the military jumped at the chance. “They were very eager to do business,” recalls Kan, who now has paging franchises in dozens of cities across China, mainly through partnerships with firms controlled by local units of the PLA.
Since the PLA began marching into business in the early 1980s with approval from the Chinese leadership, it has built a sprawling network of businesses. These enterprises do everything from raising pigs to running airlines and hospitals, mining coal to owning hotels and operating paging and cellular networks. Three of the 12 teams in China’s new professional basketball league (Forbes, Mar. 10) are owned by units of the PLA, units of which also own several of the country’s largest textile and pharmaceutical manufacturers.
Stories like this have convinced some outsiders that the People’s Liberation Army is an octopus controlling much of Chinese industry and commerce. “The great part of U.S. business in China is with companies and cartels controlled by the Chinese military,” New York Times columnist Abraham Rosenthal wrote recently. ;
But it is easy to read too much into all this. There is little centralized coordination among the literally thousands of businesses with military affiliations. Many of the larger military affiliated companies are run either by individual military officers or retired officers; others are managed by civilians. In theory the Chinese military’s General Logistics Department oversees the PLA’s commercial operations, but it has publicly admitted it does not even know how many enterprises are under military control. Nor is it able to enforce anything resembling accurate accounting.
June Teufel Dreyer, a specialist on the Chinese military at the University of Miami, evokes the image of feudal Chinese warlords when she describes the modern PLA’S businesses:
“It’s not a state within a state, but fiefdoms within a state,” she says. “It’s an entrepreneurial army, which has had its attention diverted from its stated purpose of defense. [PLA] units would rather raise profits than slog through the mud drilling.”
Which of course does raise problems for the civil authorities. PLA business units operating autonomously have been accused of counterfeiting compact discs, sneaking ballistic missiles out of China to Iran and smuggling in luxury cars from South Korea. Obviously the civil authorities will think twice before confronting a powerful local general. Says James Mulvenon, a China military consultant for RAND: “If there’s money to be made, the PLA’s there.”